Tracking Productivity in Real Time
7 Pages Posted: 6 Dec 2006
Because volatile short-term movements in productivity growth obscure the underlying trend, shifts in this trend may go unrecognized for years - a lag that can lead to policy mistakes and hence economic instability. This study develops a model for tracking productivity that brings in additional variables to help reveal the trend. The model's success is evident in its ability to detect changes in trend productivity within a year or two of their occurrence. Currently, the model indicates that the underlying trend remains strong despite recent weak productivity data.
Keywords: productivity, economic growth, factor model, regime switching
JEL Classification: O4, O51, C32
Suggested Citation: Suggested Citation